Its Time To Revise Or Scrap The 10 Medicare Supplemental Plans
In the early 1990s, congressional legislation designed to clean up the chaotic Medicare supplemental market instituted plan standardization to simplify consumer choice.
Adopted via the National Association of Insurance Commissioners were 10 model plan supplements. These plans, named alphabetically from A through J, were designed to take the guesswork out of selecting one companys benefits from anothers. All plans became identical from carrier to carrier.
It was vetted as well-intentioned legislation that mitigated much agent chicanery in selling the products, albeit at the expense of product innovation.
Today, however, that lack of product innovation has become a more serious issue to seniors than confusion over the prior issue of differing company benefits. I base this opinion on the state of todays market and also on what I am seeing in my practice.
Since President Bush was elected, he has made manifold comments regarding the archaic state of original Fee for Service Medicare. Explicitly, he has criticized Medicares failure to address current issues and risks facing American seniors.
The same condemnation can be made about the private insurance industrys mandated NAIC Medicare supplemental plan offerings.
Over the years, various news articles have complained that some of the plans provide consumers with benefits that most seniors dont need. One example is the protection against “excess charges” found in Plans F, G and J. Other articles have complained that the products are still confusing, that seniors still dont know which plan would be best for them and that the plan marketers are less than helpful.
Now, in 2003, the Medicare supplemental market appears to be even more bogged down. I view it as in a state of arrested development because agents and insurers are being forced to market within the straightjacket of these outmoded and misleading standardized supplemental contracts.
Although the structure of the original Medicare has remained unchanged since 1965, the supplemental plans effectiveness as a risk management tool was undermined by legislation in the early 1980s that altered hospital reimbursement. It was further undermined by additional legislation in the late 1980s that capped physician and outpatient provider fees.
The problem is, the 10 supplemental plans never effectively adjusted to these seminal changes. In fact, the standardized plans in todays market are actually less effective than many of their earlier predecessors.